A famous bank robber once said that he robs banks because that’s where the money is. Similarly, if he wants to make money and do it quickly, he must go where the money is: Wall Street. One of the most effective ways to make money on Wall Street is through swing trading. You can get rich through this form of short term trading. The good news is that it doesn’t require fancy software or extensive finance and stock trading experience to pull it off. You just have to have the right plan and mindset. Here is a general discussion of how you can take advantage of opportunities in the stock market through swing trading.
What is swing trading?
Like day trading, swing trading is about buying based on the momentum or trend of the stock. The most common way to make money, of course, is to buy low and sell high. You can short stocks and sell high and buy low, but this is more difficult for beginning swing traders to do. Regardless, swing trading is all about making short-term profits by betting on the momentum or trend of a stock. Unlike day trading, where you bet on very short timeframes, such as 3- or 5-minute timeframes, swing trading can involve longer timeframes, such as single days or multiple days. Instead of being glued to your computer monitor trying to cash in on some fraction of a percentage moves, you can make some decent money by waiting a bit longer. Of course, the lead time for swing trading is relative. The amount of time you wait while swing trading is still much shorter than the typical trading strategy of a fundamental or value investor. Here are some keys
This is day trading. Swing trading does not need to be that intensive.
Think of swing trading like betting on ships in an ocean. While the amount of money you win will be determined by the particular movements and activity of the specific ships you are betting on, the general condition of the ocean still plays a role in how well your ships perform. While this may be a small factor during most days, on certain days, such as when there is a storm moving out into the ocean your ship is operating in, the general sentiment of the market can drastically affect your particular swing positions. trade. Pay attention to geopolitical events or central bank actions along with general market news trends.
It determines the feelings of the different sectors.
The movements of your specific stocks are also affected by the broader industry in which the company you are betting on operates. Think broadly, look at related industries. These can affect the industry of your stock and this can make the stock go up or down. Also, pay attention to long-term trends within sectors. The negative sentiment in the sector allows you to prepare for a quick exit once its stock numbers start trending towards a certain level.
The power of the right news
The stock market is all about psychology and perceived value. Sure, a strong earnings statement from the companies you cover packs a punch, but in general, stocks are influenced by momentum and trends. Pay attention to the flow and volume of news regarding your covered stocks. Be ready to launch when certain conditions appear. On the other hand, be ready to sell when certain news trends appear.
Riding the herd mentality of the market
As much as Wall Street traders like to think of themselves as original or creative thinkers, there is a lot of herd mentality or groupthink when it comes to stock market trends. This is why it is important for you to beat the market and pick up stocks before positive trends drive up the prices of those stocks as Wall Street companies pile into a sector or group of certain stocks. Manage the herd mentality and set your price goals. Once the market herd movement reaches your target price, exit the action and wait for an opportunity to re-enter the action after a price decline or consolidation.
You will look like this after a successful swing trade.
As stated above, you should pay attention to industry trends and news to see which stocks are potential breakout stocks. These are stocks that are poised for a nice rise in value. These are usually easier to spot than you think. You just need to look at the industry leaders in a given space, industry trends, and significant players. Take a good look at the news and stock price trend of these different stocks and you can see which players are approaching breakout status. Enter these stocks and give yourself a few days or even weeks to breakout. However, if the stock does not reach the ignition stage, feel free to leave it. Why? Opportunity costs. The more time you spend waiting for a stock to rise, the more time you could have spent making money on a more promising stock.
Create Watch Lists
Create a watch list of trending stocks. This is very easy to do with commercial software. Keep track of your daily volumes and your daily high and low prices. See if there is a trend correlation between your volume and your activity. Correlate this with stock news. Some news is actually quite predictable earnings reports, for example. Keep an eye on your watch list and see how stocks respond to certain news.
Setting limit orders to buy / orders to sell
Once you have set up your watchlists and correlated their movements with trends and news factors, you need to set up timed orders in your trading software. Set the price points at which you will buy the shares. Once you’ve entered a position in the stock, swing trading allows you to set a short-term price (within a week) at which you can set up a timed sell. This way you’re not pulling your hair out as the stock you’re tracking fluctuates. Once you hit your target price, your software can get rid of the stock and you can move on. Of course, this also works for automated selling once your watched shares reach the minimum price you set for them.
Swing trading can be quite lucrative. You have to watch out for a lot of data points in order to make the right bets. Still, with the right amount of study and a systematic approach, you can earn quite a bit from swing trading. The key is to never get excited.